Large-Scale Agriculture and Outgrower Schemes in Ethiopia: Land Acquisition, Productivity, Labour Markets and Welfare Effects
Mengistu Assefa Wendimu
As a result of the growing demand for food, feed and industrial raw materials in the first decade of this century, and the usually welcoming policies regarding investors amongst the governments of developing countries, there has been a renewed interest in agriculture and an increase in large-scale land acquisition which has mostly been framed as ‘land grabbing’ throughout developing countries particularly since the mid-2000s. Against this background, outgrower schemes and contract farming are increasingly being promoted to avoid the displacement of smallholder farmers from their land due to ‘land grabbing’ for large-scale farming (i.e. outgrower schemes and contract farming could modernise agricultural production while allowing smallholders to maintain their land ownership), to integrate them into global agro-food value chains and to increase their productivity and welfare. However, the impact of large-scale agriculture and outgrower schemes on productivity, household welfare and wages in developing countries is highly contentious.
Chapter 1 of this thesis provides an introduction to the study, while also reviewing the key debate in the contemporary land ‘grabbing’ and historical large-scale versus small-scale farming literature. Chapter 2 examines the underlying causes for the failure of large-scale jatropha plantations on ‘marginal’ land. Chapter 3 compares the productivity of a factory-operated plantation with outgrower-operated plots, while Chapter 4 analyses the effects of a public sugarcane outgrower scheme on household income and asset stocks. Chapter 5 examines the wages and working conditions in ‘formal’ large-scale and ‘informal’ small-scale irrigated agriculture.
The results in Chapter 2 show that moisture stress, the use of untested planting materials, and conflict over land were the main reasons for the failure of large-scale jatropha plantations in Ethiopia. The findings in Chapter 3 show that when the use of family labour is combined with easy access to credit and technology, outgrowers on average achieve higher productivity than that obtained on large-scale plantations. On other hand, the results in Chapter 4 show that participation in a sugarcane outgrower scheme has a negative impact on households’ income and total asset stock.
From the findings in Chapter 3 it can be concluded that outgrower-operated plots have higher productivity than factory-operated plantations, whereas Chapter 4 indicates that sugarcane outgrowers’ easy access to credit and technology and their high productivity compared to the plantation does not necessarily improve their income and asset stocks particularly when participation in outgrower schemes is mandatory, the buyer has monopsony market power, and farmers have few or no exit options. These results underscore the importance of competitive output pricing mechanisms for small-scale farmers to benefit from outgrower scheme production arrangements. The main finding in Chapter 5 shows that small-scale ‘informal’ irrigated agriculture commands a higher wage than ‘formal’ large-scale agriculture, while rather different wage determination mechanisms exist in the two sectors. Human capital characteristics (education and experience) partly explain the differences in wages within the formal sector, but play no significant role in the determination of wages in the informal sector.
A general conclusion that can be drawn from Chapter 5 is that ‘formality’ is not necessarily associated with better wage benefits for labourers.
Arne Henningsen (Principal Supervisor), Associate Professor, Department of Food and Resource Economics, University of Copenhagen
Peter Gibbon (Co-supervisor), Senior Researcher Danish Institute for International Studies (DIIS), DenmGibbark
Edward Samuel Jones, Associate Professor, Department of Economics, University of Copenhagen, Denmark
Carlos Oya, Reader, SOAS, University of London, UK
Awudu Abdulai, Professor, Department of Food Economics, University of Kiel, Germany